Investment Advisor Says REIT Market More Selective About IPOs

John Vojticek, investment advisor with Deutsche Asset and Wealth Management, joined REIT.com for a video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

Vojticek discussed how the latest news on the monetary policy front is affecting REITs and their cost of capital.

“Mostly it’s had an effect on the corporate bond market and just low interest rates overall,” he said. “We look back to the last bull market in the real estate business, and it was really driven more by CMBS..”

He also gave his take on REIT mergers and acquisitions and initial public offerings. Vojticek said REIT mergers typically happen now between two attractive, higher-quality companies. He said he thinks the days of consolidating the small cap companies are over.

“You may see M&A in the lower-quality space, and that’s really more about getting bigger and having more operating leverage,” he said. “Would some of the smaller suburban office companies make sense? Yes. Would some of the smaller retail companies merging and getting themselves bigger and more operating leverage? Yes, I think there’s real value in that.”

Vojticek also said the dedicated REIT community has become more discerning regarding IPOs.

“Low-quality companies and low-quality assets have come to the market less frequently overall,” he said. “The real move we see recently is private REITs coming into the public market. They are either doing that by just listing their shares or doing some amount of equity. That trend clearly continues.”

He added that the specialty REIT portion of the industry is getting larger, primarily because the private REITs are more income-focused.

“As far as other asset classes, I think you might see things as far as private assets coming to the public market,” he said.

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NAREIT®, the National Association of Real Estate Investment Trusts®, is the worldwide representative voice for REITs and publicly traded real estate companies with an interest in U.S. real estate and capital markets. NAREIT's members are REITs and other businesses throughout the world that own, operate, and finance income-producing real estate, as well as those firms and individuals who advise, study, and service those businesses.